Thabang Mokopanele
17 July 2008
Johannesburg — BANKS that were left with no option but to repossess cars were now reclaiming 6000 a month , said WesBank sales and marketing director Chris de Kock, citing the figure for all banks combined.
While banks remain flexible in helping customers keep vehicles, extended finance periods and depreciation are forcing them to repossess to recover losses, he said at the release of the WesBank vehicle sales confidence indicator yesterday.
The survey tracks the sentiment in the new vehicle sales market by speaking to dealers principal, sales people and finance and insurance staff from all vehicle dealers.
"Unlike two years ago when customers could trade in new cars for used ones, due to financial constraints dealers and banks are unable to help because customers find that they owe more on the car," De Kock said.
Customers still have a number of options before their cars are repossessed including extending contracts, or skipping on a monthly payment. But banks look at cases individually.
"If you have a 72-month contract with the bank on a vehicle there is not much the bank can do to help you because that is the lifespan of the vehicle," he said.
Extending finance periods is risky for customers too because it means being tied into long-term commitments without room to escape.
Unlike before, when most car deals were financed over 48 months, customers are allowed to extend contracts up to 72 months.
De Kock said that the bleak outlook painted by respondents in the latest survey was a reflection of the battle facing dealers principal and sales people.
"Since we launched the indicator last year, the score has been dropping steadily from 5,4 at the end of last year, to 4,7 (which) we see now. The number of respondents describing the market as 'highly active' is almost nonexistent."
The factors cited by the respondents as influencing the situation were focused almost exclusively on interest rates and fuel prices. "The market is feeling the squeeze of local reserve bank policy and global oil and food prices, it is as simple as that," De Kock said.
Looking at the overall cost of motoring , and factoring in insurance, interest, capital, fuel and maintenance, the owner of a vehicle valued at R100 000 is paying close to 44% more now than he was in 2004.
The banks' repossession numbers have reached their highest levels in recent times, but are nevertheless lower than the number of vehicles taken back in 1998.
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